Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. YES [X] NO [ ]

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):

Large
accelerated
filer o Accelerated
filer þ Non-accelerated
filer
o

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes oNo
þ

Number
of
shares of Class A common stock outstanding as of September
30, 2006:
426,699,355

Number
of
shares of Class B common stock outstanding as of September 30, 2006: 50,000

This
quarterly report on Form 10-Q is for the three and nine months ended
September 30, 2006. The Securities and Exchange Commission ("SEC") allows
us to "incorporate by reference" information that we file with the SEC, which
means that we can disclose important information to you by referring you
directly to those documents. Information incorporated by reference is considered
to be part of this quarterly report. In addition, information that we file
with
the SEC in the future will automatically update and supersede information
contained in this quarterly report. In this quarterly report, "we," "us" and
"our" refer to Charter Communications, Inc., Charter Communications Holding
Company, LLC and their subsidiaries.

CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:

This
quarterly
report includes
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities
Act"),
and
Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange
Act"),
regarding, among other things, our plans, strategies and prospects, both
business and financial including, without limitation, the forward-looking
statements set forth in the "Results
of Operations"
and
"Liquidity
and Capital Resources"
sections
under Part I, Item 2. "Management’s
Discussion and Analysis of Financial Condition and Results of
Operations"
in this
quarterly
report.
Although we believe that our plans, intentions and expectations reflected in
or
suggested by these forward-looking statements are reasonable, we cannot assure
you that we will achieve or realize these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks, uncertainties and
assumptions including, without limitation, the factors described under
"Risk
Factors"
under
Part II, Item 1A. Many of the forward-looking statements contained in this
quarterly
report may
be
identified by the use of forward-looking words such as "believe,""expect,""anticipate,""should,""planned,""will,""may,""intend,""estimated,""aim,"
"on track," "target," "opportunity"
and "potential"
among
others. Important factors that could cause actual results to differ materially
from the forward-looking statements we make in this quarterly
report are
set
forth in this quarterly
report and
in
other reports or documents that we file from time to time with the SEC, and
include, but are not limited to:

·

the
availability, in general, of funds to meet interest payment obligations
under our debt and to fund our operations and necessary capital
expenditures, either through cash flows from operating activities,
further
borrowings or other sources and, in particular, our ability to
be able to
provide under the applicable debt instruments such funds (by dividend,
investment or otherwise) to the applicable obligor of such
debt;

·

our
ability to comply with all covenants in our indentures and credit
facilities, any violation of which would result in a violation
of the
applicable facility or indenture and could trigger a default of
other
obligations under cross-default
provisions;

·

our
ability to pay or refinance debt prior to or when it becomes due
and/or to
take advantage of market opportunities and market windows to refinance
that debt through new issuances, exchange offers or otherwise,
including
restructuring our balance sheet and leverage
position;

·

our
ability to sustain and grow revenues and cash flows from operating
activities by offering video, high-speed Internet, telephone and
other
services and to maintain and grow a stable customer base, particularly
in
the face of increasingly aggressive competition from other service
providers;

·

our
ability to obtain programming at reasonable prices or to pass programming
cost increases on to our customers;

·

general
business conditions, economic uncertainty or slowdown;
and

·

the
effects of governmental regulation, including but not limited
to local
franchise authorities, on our business.

All
forward-looking statements attributable to us or any person acting on our behalf
are expressly qualified in their entirety by this cautionary statement. We
are
under no duty or obligation to update any of the forward-looking statements
after the date of this quarterly
report.

We
have
reviewed the condensed consolidated balance sheet of Charter Communications,
Inc. and subsidiaries (the Company) as of September 30, 2006; the related
condensed consolidated statements of operations for the three-month and
nine-month periods ended September 30, 2006 and 2005; and the related condensed
consolidated statements of cash flows for the nine-month periods ended September
30, 2006 and 2005. These condensed consolidated financial statements are the
responsibility of the Company’s management.

We
conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States),
the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.

Based
on
our reviews, we are not aware of any material modifications that should be
made
to the condensed consolidated financial statements referred to above for them
to
be in conformity with U.S. generally accepted accounting
principles.

We
have
previously audited, in accordance with standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet
of
the Company as of December 31, 2005, and the related consolidated statements
of
operations, changes in shareholders’ equity (deficit), and cash flows for the
year then ended (not presented herein), and in our report dated February 27,
2006, except as to Note 4, which is as of August 8, 2006, which includes
explanatory paragraphs regarding the adoption, effective September 30, 2004,
of
EITF Topic D-108, Use
of the Residual Method to Value Acquired Assets Other than
Goodwill,
and
effective January 1, 2003, of Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting
for Stock-Based Compensation,
as
amended by SFAS No. 148, Accounting
for Stock Based Compensation—Transition and Disclosure—an amendment of FASB
Statement No. 123, we
expressed an unqualified opinion on those consolidated financial statements.
In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 2005, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which
it
has been derived.

Charter
Communications, Inc. ("Charter") is a holding company whose principal assets
at
September 30, 2006 are the 52% controlling common equity interest in Charter
Communications Holding Company, LLC ("Charter Holdco") and "mirror" notes that
are payable by Charter Holdco to Charter and have the same principal amount
and
terms as those of Charter’s convertible senior notes. Charter Holdco is the sole
owner of CCHC, LLC ("CCHC"), which is the sole owner of Charter Communications
Holdings, LLC ("Charter Holdings"). The condensed consolidated financial
statements include the accounts of Charter, Charter Holdco, CCHC, Charter
Holdings and all of their subsidiaries where the underlying operations reside,
which are collectively referred to herein as the "Company." Charter has 100%
voting control over Charter Holdco and had historically consolidated on that
basis. Charter continues to consolidate Charter Holdco as a variable interest
entity under Financial Accounting Standards Board ("FASB") Interpretation
("FIN") 46(R) Consolidation
of Variable Interest Entities.
Charter
Holdco’s limited liability company agreement provides that so long as Charter’s
Class B common stock retains its special voting rights, Charter will maintain
a
100% voting interest in Charter Holdco. Voting control gives Charter full
authority and control over the operations of Charter Holdco. All significant
intercompany accounts and transactions among consolidated entities have been
eliminated. The Company is a broadband communications company operating in
the
United States. The Company offers its customers traditional cable video
programming (analog and digital video) as well as high-speed Internet services
and, in some areas, advanced broadband services such as high definition
television, video on demand, and telephone. The Company sells its cable video
programming, high-speed Internet, telephone and advanced broadband services
on a
subscription basis. The Company also sells local advertising on
satellite-delivered networks.

The
accompanying condensed consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in
the
United States for interim financial information and the rules and regulations
of
the Securities and Exchange Commission (the "SEC"). Accordingly, certain
information and footnote disclosures typically included in Charter’s Annual
Report on Form 10-K have been condensed or omitted for this quarterly report.
The accompanying condensed consolidated financial statements are unaudited
and
are subject to review by regulatory authorities. However, in the opinion of
management, such financial statements include all adjustments, which consist
of
only normal recurring adjustments, necessary for a fair presentation of the
results for the periods presented. Interim results are not necessarily
indicative of results for a full year.

The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Areas involving significant judgments and estimates include
capitalization of labor and overhead costs; depreciation and amortization costs;
impairments of property, plant and equipment, franchises and goodwill; income
taxes; and contingencies. Actual results could differ from those
estimates.

Reclassifications

Certain
2005 amounts have been reclassified to conform with the 2006 presentation,
including discontinued operations as discussed in Note 3.

2.Liquidity
and Capital Resources

The
Company incurred net loss applicable to common stock of $133 million for the
three months ended September 30, 2006, and $974 million and $634 million for
the
nine months ended September 30, 2006 and 2005, respectively. The Company had
net
income applicable to common stock of $75 million for the three months ended
September 30, 2005. The Company’s net cash flows from operating activities were
$348 million and $118 million for the nine months ended September 30, 2006
and
2005, respectively.

8

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

Recent
Financing Transactions

In
January 2006, CCH II, LLC ("CCH II") and CCH II Capital Corp. issued $450
million in debt securities, the proceeds of which were provided to Charter
Communications Operating, LLC ("Charter Operating"), which used such funds
to
reduce borrowings, but not commitments, under the revolving portion of its
credit facilities.

In
April
2006, Charter Operating completed a $6.85 billion refinancing of its credit
facilities including a new $350 million revolving/term facility (which converts
to a term loan no later than April 2007), a $5.0 billion term loan due in 2013
and certain amendments to the existing $1.5 billion revolving credit facility.
In addition, the refinancing reduced margins on Eurodollar rate term loans
to
2.625% from a weighted average of 3.15% previously and margins on base rate
term
loans to 1.625% from a weighted average of 2.15% previously. Concurrent with
this refinancing, the CCO Holdings, LLC ("CCO Holdings") bridge loan was
terminated.

In
September 2006, Charter Holdings and its wholly owned subsidiaries, CCH I,
LLC
(“CCH I”) and CCH II, completed the exchange of approximately $797 million in
total principal amount of outstanding debt securities of Charter Holdings.
Holders of Charter Holdings notes due in 2009-2010 tendered $308 million
principal amount of notes for $250 million principal amount of new 10.25% CCH
II
notes due 2013 and $37 million principal amount of 11% CCH I notes due 2015.
Holders of Charter Holdings notes due 2011-2012 tendered $490 million principal
amount of notes for $425 million principal amount of 11% CCH I notes due 2015.
The Charter Holdings notes received in the exchanges were thereafter distributed
to Charter Holdings and retired. Also in September 2006, CCHC and CCH II
completed the exchange of $450 million principal amount of Charter’s outstanding
5.875% senior convertible notes due 2009 for $188 million in cash, 45 million
shares of Charter’s Class A Common Stock and $146 million principal amount of
10.25% CCH II notes due 2010. The convertible notes received in the exchange
are
held by CCHC.

The
Company has a significant level of debt. The Company's long-term financing
as of
September 30, 2006 consists of $5.1 billion of credit facility debt, $13.3
billion accreted value of high-yield notes and $407 million accreted value
of
convertible senior notes. For the remainder of 2006, none of the Company’s debt
matures, and in 2007 and 2008, $130 million and $50 million mature,
respectively. In 2009 and beyond, significant additional amounts will become
due
under the Company’s remaining long-term debt obligations.

The
Company requires significant cash to fund debt service costs, capital
expenditures and ongoing operations. The Company has historically funded these
requirements through cash flows from operating activities, borrowings under
its
credit facilities, sales of assets, issuances of debt and equity securities
and
cash on hand. However, the mix of funding sources changes from period to period.
For the nine months ended September 30, 2006, the Company generated $348 million
of net cash flows from operating activities, after paying cash interest of
$1.1
billion. In addition, the Company received proceeds from the sale of assets
of
approximately $988 million and used approximately $795 million for purchases
of
property, plant and equipment. Finally, the Company had net cash flows used
in
financing activities of $480 million.

The
Company expects that cash on hand, cash flows from operating activities,
proceeds from sales of assets, and the amounts available under its credit
facilities will be adequate to meet its cash needs through 2007. The Company
believes that cash flows from operating activities and amounts available under
the Company’s credit facilities may not be sufficient to fund the Company’s
operations and satisfy its interest and principal repayment obligations in
2008,
and will not be sufficient to fund such needs in 2009 and beyond. The Company
continues to work with its financial advisors in its approach to addressing
liquidity, debt maturities and its overall balance sheet leverage.

Debt
Covenants

The
Company’s ability to operate depends upon, among other things, its continued
access to capital, including credit under the Charter Operating credit
facilities. The Charter Operating credit facilities, along with the Company’s
indentures, contain certain restrictive covenants, some of which require the
Company to maintain specified financial ratios, and meet financial tests and
to
provide annual audited financial statements with an unqualified opinion from
the

9

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

Company’s
independent auditors. As of September 30, 2006, the Company is in compliance
with the covenants under its indentures and credit facilities, and the Company
expects to remain in compliance with those covenants for the next twelve months.
As of September 30, 2006, the
Company’s potential availability under its credit facilities totaled
approximately $1.6 billion, although the actual availability at that time was
only $673 million because of limits imposed by covenant restrictions.
Continued
access to the Company’s credit facilities is subject to the Company remaining in
compliance with these covenants, including covenants tied to the Company’s
operating performance. If any events of non-compliance occur, funding under
the
credit facilities may not be available and defaults on some or potentially
all
of the Company’s debt obligations could occur. An event of default under any of
the Company’s debt instruments could result in the acceleration of its payment
obligations under that debt and, under certain circumstances, in cross-defaults
under its other debt obligations, which could have a material adverse effect
on
the Company’s consolidated financial condition and results of
operations.

Specific
Limitations

Charter’s
ability to make interest payments on its convertible senior notes, and, in
2009,
to repay the outstanding principal of its convertible senior notes of $413
million, will depend on its ability to raise additional capital and/or on
receipt of payments or distributions from Charter Holdco and its subsidiaries.
As
of September 30, 2006, Charter Holdco was owed $3 million in intercompany loans
from its subsidiaries and had $7 million in cash, which were available to pay
interest and principal on Charter's convertible senior notes.In
addition, Charter has $75 million of U.S. government securities pledged as
security for the semi-annual interest payments on Charter’s convertible senior
notes scheduled in November 2006 and in 2007. CCHC also holds $450 million
of Charter’s convertible senior notes. As a result, if CCHC continues to
hold those notes, CCHC will receive interest payments on the convertible senior
notes from the pledged government securities. The cumulative amount of
interest payments expected to be received by CCHC may be available to be
distributed to pay interest on the outstanding $413 million of the convertible
senior notes due in 2008 and May 2009, although CCHC may use those amounts
for
other purposes.

Distributions
by Charter’s subsidiaries to a parent company (including Charter, Charter Holdco
and CCHC) for
payment of principal on parent company notes are
restricted under the indentures governing the CIH notes, CCH I notes, CCH II
notes, CCO Holdings notes, and Charter Operating notes unless
there is no default under the applicable indenture and each applicable
subsidiary’s leverage ratio test is met at the time of such distribution.
For
the
quarter ended September 30, 2006, there was no default under any of these
indentures. However, certain of the Company’s subsidiaries did not meet their
applicable leverage ratio tests based on September 30, 2006 financial results.
As
a
result, distributions from certain of the Company’s subsidiaries to their parent
companies would have been restricted at such time and will continue to be
restricted unless those tests are met. Distributions
by Charter Operating for payment of principal on parent company notes are
further restricted by the covenants in the credit facilities.

Distributions
by CIH, CCH I, CCH II, CCO Holdings and Charter Operating to a parent company
for payment of parent company interest are permitted if there is no default
under the aforementioned indentures.

The
indentures governing the Charter Holdings notes permit Charter Holdings to
make
distributions to Charter Holdco for payment of interest or principal on the
convertible senior notes, only if, after giving effect to the distribution,
Charter Holdings can incur additional debt under the leverage ratio of 8.75
to
1.0, there is no default under Charter Holdings’ indentures, and other specified
tests are met. For the quarter ended September
30, 2006, there was no default under Charter Holdings’ indentures and the other
specified tests were met. However, Charter Holdings did not meet the leverage
ratio test of 8.75 to 1.0 based on September 30, 2006 financial
results.
As a
result, distributions from Charter Holdings to Charter or Charter Holdco would
have been restricted at such time and will continue to be restricted unless
that
test is met. During
periods
in which distributions are restricted,
the
indentures governing the Charter Holdings notes permit Charter Holdings and
its
subsidiaries to make specified investments (that are not restricted payments)
in
Charter Holdco or Charter up to an amount determined by a formula, as long
as
there is no default under the indentures.

10

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

3.Sale
of Assets

In
2006,
the Company sold certain cable television systems serving a total of
approximately 356,000 analog video customers in 1) West Virginia and
Virginia
to
Cebridge Connections, Inc. (the “Cebridge Transaction”); 2) Illinois and
Kentucky to Telecommunications Management, LLC, doing business as New Wave
Communications (the “New Wave Transaction”) and 3) Nevada, Colorado, New Mexico
and Utah to Orange Broadband Holding Company, LLC
(the
“Orange Transaction”) for a total sales price of approximately $971 million. The
Company used the net proceeds from the asset sales to reduce borrowings, but
not
commitments, under the revolving portion of the Company’s credit facilities.
These cable systems met the criteria for assets held for sale. As such, the
assets were written down to fair value less estimated costs to sell resulting
in
asset impairment charges during the nine months ended September 30, 2006 of
approximately $99 million related to the New Wave Transaction and the Orange
Transaction. Also in the third quarter of 2006, the Company recorded asset
impairment charges of $60 million related to other cable systems meeting the
criteria of assets held for sale.

During
the second quarter of 2006, the Company determined, based on changes in the
Company’s organizational and cost structure, that its asset groupings for long
lived asset accounting purposes are at the level of their individual market
areas, which are at a level below the Company’s geographic clustering. As a
result, the Company has determined that the West Virginia and Virginia cable
systems comprise operations and cash flows that for financial reporting purposes
meet the criteria for discontinued operations. Accordingly, the results of
operations for the West Virginia and Virginia cable systems, including a gain
of
$200 million on the closing of the transaction, have been presented as
discontinued operations, net of tax for the three and nine months ended
September 30, 2006 and all prior periods presented herein have been reclassified
to conform to the current presentation.

Summarized
consolidated financial information for the three and nine months ended September
30, 2006 and 2005 for the West Virginia and Virginia cable systems is as
follows:

Three
Months

Ended
September 30,

Nine
Months

Ended
September 30,

2006

2005

2006

2005

Revenues

$

--

$

53

$

109

$

166

Income
before income taxes

$

200

$

9

$

238

$

28

Income
tax benefit (expense)

$

--

$

(5

)

$

(4

)

$

5

Net
income

$

200

$

4

$

234

$

33

Earnings
per common share, basic

$

0.61

$

0.01

$

0.73

$

0.11

Earnings
per common share, diluted

$

0.61

$

--

$

0.73

$

0.11

In
2005,
the Company closed the sale of certain cable systems in Texas, West Virginia
and
Nebraska representing a total of approximately 33,000 analog video customers.
During the nine months ended September 30, 2005, certain of those cable systems
met the criteria for assets held for sale. As such, the assets were written
down
to fair value less estimated costs to sell resulting in asset impairment charges
during the nine months ended September 30, 2005 of approximately $39 million.

4. Franchises
and
Goodwill

Franchise
rights represent the value attributed to agreements with local authorities
that
allow access to homes in cable service areas acquired through the purchase
of
cable systems. Management estimates the fair value of franchise rights at the
date of acquisition and determines if the franchise has a finite life or an
indefinite-life as defined by Statement of Financial Accounting Standards
(“SFAS”) No. 142, Goodwill
and Other Intangible Assets.
Franchises
that qualify for indefinite-life treatment under SFAS No. 142 are tested
for impairment annually each October 1 based on valuations, or more frequently
as warranted by events or changes in circumstances. Franchises are aggregated
into essentially inseparable asset groups to conduct the valuations. The asset
groups generally represent geographical clustering of
the

11

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

Company’s
cable systems into groups by which such
systems are managed. Management believes such grouping represents the highest
and best use of those assets.

As
of
September 30, 2006 and December 31, 2005, indefinite-lived and finite-lived
intangible assets are presented in the following table:

September
30, 2006

December 31,
2005

Gross

Carrying

Amount

Accumulated

Amortization

Net

Carrying

Amount

Gross

Carrying

Amount

Accumulated
Amortization

Net

Carrying

Amount

Indefinite-lived
intangible assets:

Franchises
with indefinite lives

$

9,204

$

--

$

9,204

$

9,806

$

--

$

9,806

Goodwill

61

--

61

52

--

52

$

9,265

$

--

$

9,265

$

9,858

$

--

$

9,858

Finite-lived
intangible assets:

Franchises
with finite lives

$

23

$

6

$

17

$

27

$

7

$

20

For
the
nine months ended September 30, 2006, the net carrying amount of
indefinite-lived and finite-lived franchises was reduced by $455 million and
$2
million, respectively, related to cable asset sales completed in the first
and
third quarter of 2006 and $147 million as a result of the asset impairment
charges recorded related to these cable asset sales (see Note 3). Franchise
amortization expense represents the amortization relating to franchises that
did
not qualify for indefinite-life treatment under SFAS No. 142, including costs
associated with franchise renewals. Franchise amortization expense for the
three
and nine months ended September 30, 2006 was approximately $0 and $1 million,
respectively, and for the three and nine months ended September 30, 2005 was
approximately $1 million and $3 million, respectively. The Company expects
that
amortization expense on franchise assets will be approximately $2 million
annually for each of the next five years. Actual amortization expense in future
periods could differ from these estimates as a result of new intangible asset
acquisitions or divestitures, changes in useful lives and other relevant
factors.

For
the
nine months ended September 30, 2006, the net carrying amount of goodwill
increased $9 million as a result of the Company’s purchase of certain cable
systems in Minnesota from Seren Innovations, Inc. in January 2006.

5.Accounts
Payable and Accrued Expenses

Accounts
payable and accrued expenses consist of the following as of September 30, 2006
and December 31, 2005:

September
30,

2006

December 31,

2005

Accounts
payable - trade

$

85

$

114

Accrued
capital expenditures

77

73

Accrued
expenses:

Interest

513

333

Programming
costs

273

269

Franchise-related
fees

58

67

Compensation

105

90

Other

249

245

$

1,360

$

1,191

12

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

6. Long-Term
Debt

Long-term
debt consists of the following as of September
30, 2006 and
December 31, 2005:

September
30, 2006

December
31, 2005

Principal
Amount

Accreted
Value

Principal
Amount

Accreted
Value

Long-Term
Debt

Charter
Communications, Inc.:

4.750%
convertible senior notes due 2006

$

--

$

--

$

20

$

20

5.875%
convertible senior notes due 2009

413

407

863

843

Charter
Communications Holdings, LLC:

8.250%
senior notes due 2007

105

105

105

105

8.625%
senior notes due 2009

187

187

292

292

9.920%
senior discount notes due 2011

63

63

198

198

10.000%
senior notes due 2009

105

105

154

154

10.250%
senior notes due 2010

32

32

49

49

11.750%
senior discount notes due 2010

21

21

43

43

10.750%
senior notes due 2009

71

71

131

131

11.125%
senior notes due 2011

52

52

217

217

13.500%
senior discount notes due 2011

62

62

94

94

9.625%
senior notes due 2009

52

52

107

107

10.000%
senior notes due 2011

71

71

137

136

11.750%
senior discount notes due 2011

55

55

125

120

12.125%
senior discount notes due 2012

91

88

113

100

CCH
I Holdings, LLC:

11.125%
senior notes due 2014

151

151

151

151

9.920%
senior discount notes due 2014

471

471

471

471

10.000%
senior notes due 2014

299

299

299

299

11.750%
senior discount notes due 2014

815

815

815

781

13.500%
senior discount notes due 2014

581

581

581

578

12.125%
senior discount notes due 2015

217

210

217

192

CCH
I, LLC:

11.000%
senior notes due 2015

3,987

4,094

3,525

3,683

CCH
II, LLC:

10.250%
senior notes due 2010

2,198

2,190

1,601

1,601

10.250%
senior notes due 2013

250

262

--

--

CCO
Holdings, LLC:

8¾%
senior notes due 2013

800

795

800

794

Senior
floating notes due 2010

550

550

550

550

Charter
Communications Operating, LLC:

8.000%
senior second lien notes due 2012

1,100

1,100

1,100

1,100

8
3/8% senior second lien notes due 2014

770

770

733

733

Renaissance
Media Group LLC:

10.000%
senior discount notes due 2008

--

--

114

115

Credit
Facilities

Charter
Operating

5,140

5,140

5,731

5,731

$

18,709

$

18,799

$

19,336

$

19,388

The
accreted values presented above generally
represent the principal amount of the notes less the original issue discount
at
the time of sale plus the accretion to the balance sheet date except as follows.
Certain of the CIH notes,

13

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

CCH
I
notes and CCH II notes issued in exchange for Charter Holdings notes and Charter
convertible notes in 2005 and 2006 are recorded for financial reporting purposes
at values different from the current accreted value for legal purposes and
notes
indenture purposes (the amount that is currently payable if the debt becomes
immediately due). As of September 30, 2006, the accreted value of the Company’s
debt for legal purposes and notes indenture purposes is approximately $18.5
billion.

In
January 2006, CCH II and CCH II Capital Corp. issued $450 million in debt
securities, the proceeds of which were provided, directly or indirectly, to
Charter Operating, which used such funds to reduce borrowings, but not
commitments, under the revolving portion of its credit facilities.

In
March
2006, the Company exchanged $37 million of Renaissance Media Group LLC 10%
senior discount notes due 2008 for $37 million principal amount of new Charter
Operating 8 3/8% senior second-lien notes due 2014 issued in a private
transaction. The terms and conditions of the new Charter Operating 8 3/8% senior
second-lien notes due 2014 are identical to Charter Operating’s currently
outstanding 8 3/8% senior second-lien notes due 2014. In June 2006, the Company
retired the remaining $77 million principal amount of Renaissance Media Group
LLC’s 10% senior discount notes due 2008.

In
April
2006, Charter Operating completed a $6.85 billion refinancing of its credit
facilities including a new $350 million revolving/term facility (which converts
to a term loan no later than April 2007), a $5.0 billion term loan due in 2013
and certain amendments to the existing $1.5 billion revolving credit facility.
In addition, the refinancing reduced margins on Eurodollar rate term loans
to
2.625% from a weighted average of 3.15% previously and margins on base rate
term
loans to 1.625% from a weighted average of 2.15% previously. Concurrent with
this refinancing, the CCO Holdings bridge loan was terminated.

In
June
2006, the Company retired the remaining $20 million principal amount of
Charter’s 4.75% convertible senior notes due 2006.

In
September 2006, Charter Holdings, CCH I and CCH II, completed the exchange
of
approximately $797 million in total principal amount of outstanding debt
securities of Charter Holdings for $250 million principal amount of new 10.25%
CCH II notes due 2013 and $462 million principal amount of 11% CCH I notes
due
2015. The Charter Holdings notes received in the exchange were thereafter
distributed to Charter Holdings and cancelled.

Also
in
September 2006, CCHC and CCH II completed the exchange of $450 million principal
amount of Charter’s outstanding 5.875% senior convertible notes due 2009 for
$188 million in cash, 45 million shares of Charter’s Class A common stock valued
at $68 million and $146 million principal amount of 10.25% CCH II notes due
2010. The convertible notes received in the exchange are held by
CCHC.

7.Minority
Interest and Equity Interest of Charter Holdco

Charter
is a holding company whose primary assets are a controlling equity interest
in
Charter Holdco, the indirect owner of the Company’s cable systems, and $863
million at September 30, 2006 and December 31, 2005 of mirror notes that are
payable by Charter Holdco to Charter and have the same principal amount and
terms as those of Charter’s convertible senior notes. Minority
interest on the Company’s consolidated balance sheets as of September 30, 2006
and December 31, 2005 primarily represents preferred membership interests in
CC
VIII, LLC ("CC VIII"), an indirect subsidiary of Charter Holdco, of $191 million
and $188 million, respectively. As
more
fully described in Note 20, this preferred interest is held by Mr. Allen,
Charter’s Chairman and controlling shareholder, and CCH I. Approximately 5.6% of
CC VIII’s income is allocated to minority interest.

8. Share
Lending
Agreement

Charter
issued 94.9 million and 22.0 million shares of Class A common stock during
2005
and the nine months ended September 30, 2006, respectively, in public offerings.
The shares were issued pursuant to the share lending agreement, pursuant to
which Charter had previously agreed to loan up to 150 million shares to
Citigroup Global

14

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

Markets
Limited ("CGML"). Because less than the full
150 million shares covered by the share lending agreement were sold in offerings
through September 30, 2006, Charter is obligated until November 2006 to issue,
at CGML’s request, up to an additional 33.1 million loaned shares in subsequent
registered public offerings pursuant to the share lending
agreement.

These
offerings of Charter’s Class A common stock were conducted to facilitate
transactions by which investors in Charter’s 5.875% convertible senior notes due
2009, issued on November 22, 2004, hedged their investments in the convertible
senior notes. Charter did not receive any of the proceeds from the sale of
this
Class A common stock. However, under the share lending agreement, Charter
received a loan fee of $.001 for each share that it lends to CGML. As of
September 30, 2006, 57.4 million shares had been returned under the share
lending agreement.

The
issuance of up to a total of 150 million shares of common stock (of which 116.9
million were issued in 2005 and 2006) pursuant to this share lending agreement
is essentially analogous to a sale of shares coupled with a forward contract
for
the reacquisition of the shares at a future date. An instrument that requires
physical settlement by repurchase of a fixed number of shares in exchange for
cash is considered a forward purchase instrument. While the share lending
agreement does not require a cash payment upon return of the shares, physical
settlement is required (i.e., the shares borrowed must be returned at the end
of
the arrangement). The fair value of the 59.5 million loaned shares outstanding
is approximately $90 million as of September 30, 2006. However, the net effect
on shareholders’ deficit of the shares lent pursuant to the share lending
agreement, which includes Charter’s requirement to lend the shares and the
counterparties’ requirement to return the shares, is de minimis and represents
the cash received upon lending of the shares and is equal to the par value
of
the common stock to be issued.

The
59.5
million shares issued through September 30, 2006 and still outstanding pursuant
to the share lending agreement are required to be returned, in accordance with
the contractual arrangement, and are treated in basic and diluted earnings
per
share as if they were already returned and retired. Consequently, there is
no
impact of the shares of common stock lent under the share lending agreement
in
the earnings per share calculation.

9. Comprehensive
Loss

Certain
marketable equity securities are classified as available-for-sale and reported
at market value with unrealized gains and losses recorded as accumulated other
comprehensive loss on the accompanying condensed consolidated balance sheets.
Additionally, the Company reports changes in the fair value of interest rate
agreements designated as hedging the variability of cash flows associated with
floating-rate debt obligations, that meet the effectiveness criteria of SFAS
No.
133, Accounting
for Derivative Instruments and Hedging Activities,
in
accumulated other comprehensive loss, after giving effect to the minority
interest share of such gains and losses. Comprehensive loss for the three months
ended September
30,
2006
was $134 million and was $975 million and $627 million for the nine months
ended
September 30, 2006 and 2005, respectively. Comprehensive income for the three
months ended September 30, 2005 was $77 million.

10.Accounting
for Derivative Instruments and Hedging Activities

The
Company uses interest rate risk management derivative instruments, such as
interest rate swap agreements and interest rate collar agreements (collectively
referred to herein as interest rate agreements) to manage its interest costs.
The Company’s policy is to manage interest costs using a mix of fixed and
variable rate debt. Using interest rate swap agreements, the Company has agreed
to exchange, at specified intervals through 2007, the difference between fixed
and variable interest amounts calculated by reference to an agreed-upon notional
principal amount. Interest rate collar agreements are used to limit the
Company’s exposure to and benefits from interest rate fluctuations on variable
rate debt to within a certain range of rates.

The
Company does not hold or issue derivative instruments for trading purposes.
The
Company does, however, have certain interest rate derivative instruments that
have been designated as cash flow hedging instruments. Such instruments
effectively convert variable interest payments on certain debt instruments
into
fixed payments. For qualifying hedges, SFAS No. 133 allows derivative gains
and
losses to offset related results on hedged items in the

15

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

consolidated
statement of operations. The Company has formally documented, designated and
assessed the effectiveness of transactions that receive hedge accounting. For
the three months ended September
30,
2006
and 2005, other income, net includes gains of $0 and $1 million, respectively,
and for each of the nine months ended September 30, 2006 and 2005, other income,
net includes gains of $2 million which represent cash flow hedge ineffectiveness
on interest rate hedge agreements arising from differences between the critical
terms of the agreements and the related hedged obligations. Changes in the
fair
value of interest rate agreements designated as hedging instruments of the
variability of cash flows associated with floating-rate debt obligations that
meet the effectiveness criteria of SFAS No. 133 are reported in accumulated
other comprehensive loss. For the three months ended September
30,
2006
and 2005, a loss of $1 million and a gain of $5 million, respectively, and
for
the nine months ended September 30, 2006 and 2005, a loss of $1 million and
a
gain of $14 million, respectively, related to derivative instruments designated
as cash flow hedges, was recorded in accumulated other comprehensive loss and
minority interest. The amounts are subsequently reclassified into interest
expense as a yield adjustment in the same period in which the related interest
on the floating-rate debt obligations affects earnings (losses).

Certain
interest rate derivative instruments are not designated as hedges as they do
not
meet the effectiveness criteria specified by SFAS No. 133. However, management
believes such instruments are closely correlated with the respective debt,
thus
managing associated risk. Interest rate derivative instruments not designated
as
hedges are marked to fair value, with the impact recorded as other income in
the
Company’s condensed consolidated statements of operations. For the three months
ended September
30,
2006
and 2005, other income, net includes losses of $3 million and gains of $16
million, respectively, and for the nine months ended September 30, 2006 and
2005, other income, net includes gains of $6 million and $41 million,
respectively, for interest rate derivative instruments not designated as hedges.

As
of
September
30,
2006
and December 31, 2005, the Company had outstanding $1.7 billion and $1.8 billion
and $20 million and $20 million, respectively, in notional amounts of interest
rate swaps and collars, respectively. The notional amounts of interest rate
instruments do not represent amounts exchanged by the parties and, thus, are
not
a measure of exposure to credit loss. The amounts exchanged are determined
by
reference to the notional amount and the other terms of the
contracts.

Certain
provisions of the Company’s 5.875% convertible senior notes due 2009 are
considered embedded derivatives for accounting purposes and are required to
be
accounted for separately from the convertible senior notes. In accordance with
SFAS No. 133, these derivatives are marked to market with gains or losses
recorded in interest expense on the Company’s condensed consolidated statement
of operations. For the three months ended September
30,
2006
and 2005, the Company recognized $0 and a loss of $1 million, respectively,
and
for the nine months ended September 30, 2006 and 2005, the Company recognized
gains of $2 million and $26 million, respectively. The gains resulted in a
decrease in interest expense related to these derivatives and losses resulted
in
an increase in interest expense. At September
30,
2006
and December 31, 2005, $1 million and $1 million, respectively, is recorded
in
accounts payable and accrued expenses relating to the short-term portion of
these derivatives and $0 and $1 million, respectively, is recorded in other
long-term liabilities related to the long-term portion.

16

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

11.Revenues

Revenues
consist of the following for the three and nine months ended September 30,
2006
and 2005:

Three
Months

Ended
September 30,

Nine
Months

Ended
September 30,

2006

2005

2006

2005

Video

$

836

$

811

$

2,520

$

2,434

High-speed
Internet

267

222

773

647

Telephone

37

9

86

23

Advertising
sales

81

72

228

207

Commercial

78

68

227

196

Other

89

83

257

239

$

1,388

$

1,265

$

4,091

$

3,746

12. Operating
Expenses

Operating
expenses consist of the following for the three and nine months ended September
30, 2006 and 2005:

Three
Months

Ended
September 30,

Nine
Months

Ended
September 30,

2006

2005

2006

2005

Programming

$

371

$

343

$

1,126

$

1,021

Service

216

196

624

552

Advertising
sales

28

25

80

72

$

615

$

564

$

1,830

$

1,645

13.Selling,
General and Administrative Expenses

Selling,
general and administrative expenses consist of the following for the three
and
nine months ended September 30, 2006 and 2005:

Three
Months

Ended
September 30,

Nine
Months

Ended
September 30,

2006

2005

2006

2005

General
and administrative

$

253

$

226

$

724

$

644

Marketing

56

37

136

102

$

309

$

263

$

860

$

746

Components
of selling expense are included in general and administrative and marketing
expense.

17

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

14. Other
Operating Expenses, Net

Other
operating expenses, net consist of the following for the three and nine months
ended September 30, 2006 and 2005:

Three
Months

Ended
September 30,

Nine
Months

Ended
September 30,

2006

2005

2006

2005

Loss
on sale of assets, net

$

2

$

1

$

2

$

5

Hurricane
asset retirement loss

--

19

--

19

Special
charges, net

2

2

12

4

$

4

$

22

$

14

$

28

Special
charges, net for the three and nine months ended September 30, 2006 primarily
represent severance associated with the closing of call centers and divisional
restructuring. Special charges, net for the three and nine months ended
September 30, 2005 primarily represent severance costs as a result of reducing
workforce, consolidating administrative offices and executive severance.

For
the
three and nine months ended September 30, 2005, hurricane asset retirement
loss
represents the write off of $19 million of the Company’s plants’ net book value
as a result of significant plant damage suffered by certain of the Company’s
cable systems in Louisiana as a result of hurricanes Katrina and Rita.

For
the
nine months ended September 30, 2005, special charges, net were offset by
approximately $2 million related to an agreed upon discount in respect of the
portion of settlement consideration payable under the settlement terms of class
action lawsuits.

15. Other
Income,
Net

Other
income, net consists of the following for the three and nine months ended
September 30, 2006 and 2005:

Three
Months

Ended
September 30,

Nine
Months

Ended
September 30,

2006

2005

2006

2005

Gain
(loss) on derivative instruments and

hedging
activities, net

$

(3

)

$

17

$

8

$

43

Gain
on extinguishment of debt

128

490

101

498

Minority
interest

(2

)

(3

)

(3

)

(9

)

Gain
on investments

8

--

12

21

Other,
net

--

--

3

--

$

131

$

504

$

121

$

553

Gain
on extinguishment of debt

The
exchange in September 2006 between Charter Holdings and CCH I and CCH II
resulted in a gain on extinguishment of debt for the three and nine months
ended
September 30, 2006 of approximately $108 million. The exchange in September
2006
between Charter and CCHC and CCH II resulted in a gain on extinguishment of
debt
for the three and nine months ended September 30, 2006 of approximately $20
million. See Note 6.

18

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

The
Charter Operating refinancing in April 2006 resulted in a loss on extinguishment
of debt for the three and nine months ended September 30, 2006 of approximately
$27 million. See Note 6.

In
September 2005, Charter Holdings and its wholly owned subsidiaries, CCH I and
CIH, completed the exchange of approximately $6.8 billion total principal amount
of outstanding debt securities of Charter Holdings for $3.5 billion principal
amount of new 11% CCH I senior secured notes due 2015. Holders of Charter
Holdings notes due 2011 and 2012 exchanged $845 million principal amount of
notes for $662 million and $2.5 billion principal amount of various series
of
new CIH notes. The
exchanges resulted in a net gain on extinguishment of debt for the three and
nine months ended September
30,
2005
of approximately $490 million.

In
March
and June 2005, Charter Operating consummated exchange transactions with a small
number of institutional holders of Charter Holdings 8.25% senior notes due
2007
pursuant to which Charter Operating issued, in private placements, approximately
$333 million principal amount of new notes with terms identical to Charter
Operating's 8.375% senior second lien notes due 2014 in exchange for
approximately $346 million of the Charter Holdings 8.25% senior notes due 2007.
The exchanges resulted in a gain on extinguishment of debt of approximately
$10
million for the nine months ended September 30, 2005.

During
the nine months ended September 30, 2005, the Company repurchased in private
transactions from a small number of institutional holders, a total of $131
million principal amount of its 4.75% convertible senior notes due 2006. These
transactions resulted in a net gain on extinguishment of debt of approximately
$4 million for the nine months ended September 30, 2005.

In
March
2005, Charter’s subsidiary, CC V Holdings, LLC, redeemed all of its 11.875%
notes due 2008, at 103.958% of principal amount, plus accrued and unpaid
interest to the date of redemption. The total cost of redemption was
approximately $122 million and was funded through borrowings under the Charter
Operating credit facilities. The redemption resulted in a loss on extinguishment
of debt for the nine months ended September
30, 2005 of
approximately $5 million.

Gain
on investments

Gain
on
investments for the three and nine months ended September 30, 2006 represents
gains realized on the sale of investments. Gain on investments for the nine
months ended September 30, 2005 primarily represents a
gain
realized on an exchange of the Company’s interest in an equity investee for an
investment in a larger enterprise.

16.Income
Taxes

All
operations are held through Charter Holdco and its direct and indirect
subsidiaries. Charter Holdco and the majority of its subsidiaries are limited
liability companies that are not subject to income tax. However, certain of
these subsidiaries are corporations and are subject to income tax. All of the
taxable income, gains, losses, deductions and credits of Charter Holdco are
passed through to its members: Charter, Charter
Investment, Inc. (“CII”)and
Vulcan Cable III Inc. ("Vulcan Cable"). Charter is responsible for its share
of
taxable income or loss of Charter Holdco allocated to Charter in accordance
with
the Charter Holdco limited liability company agreement (the "LLC Agreement")
and
partnership tax rules and regulations.

As
of
September 30, 2006 and December 31, 2005, the Company had net deferred income
tax liabilities of approximately $435 million and $325 million, respectively.
Approximately $199 million and $212 million of the deferred tax liabilities
recorded in the condensed consolidated financial statements at September 30,
2006 and December 31, 2005, respectively, relate to certain indirect
subsidiaries of Charter Holdco, which file separate income tax
returns.

During
the three and nine months ended September 30, 2006, the Company recorded $64
million and $128 million of income tax expense, respectively. Income tax expense
of $0 and $4 million was associated with discontinued operations for the same
periods. During the three and nine months ended September 30, 2005, the Company

19

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

recorded
$29 million and $75 million of income tax expense, respectively. Income tax
expense of $5 million and income tax benefit of $5 million was associated with
discontinued operations for the same periods.
Income
tax expense is recognized through increases in the deferred tax liabilities
related to Charter’s investment in Charter Holdco, as well as current federal
and state income tax expense and increases to the deferred tax liabilities
of
certain of Charter’s indirect corporate subsidiaries.

Increases
in the deferred tax liabilities related to Charter’s investment in Charter
Holdco occurred as a result of cable asset sales. Income tax expense was offset
by deferred tax benefits of $9 million and $30 million related to asset
impairment charges recorded in the three and nine months ended September 30,
2006, respectively. Additionally, income tax expense was offset by deferred
tax
benefits of $6 million related to asset impairment charges recorded in the
nine
months ended September 30, 2005.

The
Company recorded an additional deferred tax asset of approximately $25 million
and $337 million during the three and nine months ended September 30, 2006,
respectively, relating to net operating loss carryforwards, but recorded a
valuation allowance with respect to this amount because of the uncertainty
of
the ability to realize a benefit from the Company’s carryforwards in the future.
The
Company has deferred tax assets of approximately $4.5 billion and $4.2 billion
as of September 30, 2006 and December 31, 2005, respectively, which primarily
relate to financial and tax losses allocated to Charter from Charter Holdco.
The
deferred tax assets include approximately $2.6 billion and $2.4 billion of
tax
net operating loss carryforwards as of September 30, 2006 and December 31,
2005,
respectively (generally expiring in years 2007 through 2026), of Charter and
its
indirect corporate subsidiaries. Valuation allowances of $4.0 billion and $3.7
billion as of September 30, 2006 and December 31, 2005, respectively, exist
with
respect to these deferred tax assets.

Realization
of any benefit from the Company’s tax net operating losses is dependent on: (1)
Charter and its indirect corporate subsidiaries’ ability to generate future
taxable income and (2) the absence of certain future deemed "ownership
changes"
of
Charter's common stock. An "ownership
change"
as
defined in the applicable federal income tax rules, would place significant
limitations, on an annual basis, on the use of such net operating losses to
offset any future taxable income the Company may generate. Such limitations,
in
conjunction with the net operating loss expiration provisions, could effectively
eliminate the Company’s ability to use a substantial portion of its net
operating losses to offset any future taxable income. Future transactions and
the timing of such transactions could cause an ownership change. Such
transactions include additional issuances of common stock by the Company
(including but not limited to the issuance of up to a total of 150 million
shares of common stock (of which 116.9 million were issued September 30, 2006)
under the share lending agreement), the issuance of shares of common stock
upon
future conversion of Charter’s convertible senior notes, reacquisition of the
borrowed shares by Charter (of which 57.4 million were returned through
September 30, 2006), or acquisitions or sales of shares by certain holders
of
Charter’s shares, including persons who have held, currently hold, or accumulate
in the future five percent or more of Charter’s outstanding stock (including
upon an exchange by Mr. Allen or his affiliates, directly or indirectly, of
membership units of Charter Holdco into CCI common stock). Many of the foregoing
transactions are beyond management’s control.

In
assessing the realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax assets
will be realized. Because of the uncertainties in projecting future taxable
income of Charter Holdco, valuation allowances have been established except
for
deferred benefits available to offset certain deferred tax
liabilities.

Charter
Holdco is currently under examination by the Internal Revenue Service for the
tax years ending December 31, 2003 and 2002. In addition, one of the Company’s
indirect corporate subsidiaries is under examination by the Internal Revenue
Service for the tax year ended December 31, 2004. The Company’s results
(excluding Charter and the indirect corporate subsidiaries, with the exception
of the indirect corporate subsidiary under examination) for these years are
subject to this examination. Management does not expect the results of this
examination to have a material adverse effect on the Company’s condensed
consolidated financial condition or results of operations.

20

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

17.Contingencies

The
Company is a defendant or co-defendant in several unrelated lawsuits claiming
infringement of various patents relating to various aspects of its businesses.
Other industry participants are also defendants in certain of these cases,
and,
in many cases, the Company expects that any potential liability would be
the
responsibility of its equipment vendors pursuant to applicable contractual
indemnification provisions. In the event that a court ultimately determines
that
the Company infringes on any intellectual property rights, it may be subject
to
substantial damages and/or an injunction that could require the Company or
its
vendors to modify certain products and services the Company offers to its
subscribers. While the Company believes the lawsuits are without merit and
intends to defend the actions vigorously, the lawsuits could be material
to the
Company’s consolidated results of operations of any one period, and no assurance
can be given that any adverse outcome would not be material to the Company’s
consolidated financial condition, results of operations or liquidity.

Charter
is a party to other lawsuits and claims that arise in the ordinary course of
conducting its business. The ultimate outcome of these other legal matters
pending against the Company or its subsidiaries cannot be predicted, and
although such lawsuits and claims are not expected individually to have a
material adverse effect on the Company’s consolidated financial condition,
results of operations or liquidity, such lawsuits could have, in the aggregate,
a material adverse effect on the Company’s consolidated financial condition,
results of operations or liquidity.

18.Earnings
(Loss) Per Share

Basic
earnings (loss) per share is based on the average number of shares of common
stock outstanding during the period. Diluted earnings per share is based on
the
average number of shares used for the basic earnings per share calculation,
adjusted for the dilutive effect of stock options, restricted stock, convertible
debt, convertible redeemable preferred stock and exchangeable membership
units.
Basic
loss per share equals diluted loss per share for the three months ended
September 30, 2006 and the nine months ended September 30, 2006 and 2005.

Three
Months Ended September 30, 2005

Earnings

Earnings
from Continuing Operations

Shares

Earnings
Per Share

Earnings
Per Share from Continuing Operations

Basic
earnings per share

$

75

$

71

316,214,740

$

0.24

$

0.23

Effect
of restricted stock

--

--

840,112

--

--

Effect
of Charter Investment Class B Common Stock

--

--

222,818,858

(0.10

)

(0.10

)

Effect
of Vulcan Cable III Inc. Class B Common Stock

--

--

116,313,173

(0.02

)

(0.02

)

Effect
of 5.875% convertible senior notes due 2009

13

13

356,404,959

(0.03

)

(0.03

)

Diluted
earnings per share

$

88

$

84

1,012,591,842

$

0.09

$

0.08

The
effect of restricted stock represents the shares resulting from the vesting
of
nonvested restricted stock, calculated using the treasury stock method. Charter
Investment Class B common stock and Vulcan Cable III Inc. Class B common stock
represent membership units in Charter Holdco, held by entities controlled by
Mr.
Allen, that are exchangeable at any time on a one-for-one basis for shares
of
Charter Class B common stock, which are in turn convertible on a one-for-one
basis into shares of Charter Class A common stock. The 5.875% convertible senior
notes due 2009 represent the shares resulting from the assumed conversion of
the
notes into shares of Charter’s Class A common stock.

All
options to purchase common stock, which were outstanding during the three months
ended September 30, 2005, were not included in the computation of diluted
earnings per share because the options’ exercise price was greater than the
average market price of the common shares or they were otherwise antidilutive.
Charter’s 4.75% convertible senior notes, Charter’s series A convertible
redeemable preferred stock and all of the outstanding exchangeable membership

21

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

units
in
Charter’s indirect subsidiary, CC VIII, LLC, also were not included in the
computation of diluted earnings per share because the effect of the conversions
would have been antidilutive.

The
27.2
million shares issued as of September 30, 2005 pursuant to the share lending
agreement are required to be returned, in accordance with the contractual
arrangement, and are treated in basic and diluted earnings per share as if
they
were already returned and retired. Consequently, there is no impact of the
shares of common stock lent under the share lending agreement in the earnings
per share calculation.

19. Stock
Compensation
Plans

The
Company has stock option plans (the “Plans”) which provide for the grant of
non-qualified stock options, stock appreciation rights, dividend equivalent
rights, performance units and performance shares, share awards, phantom stock
and/or shares of restricted stock (not to exceed 20,000,000 shares of Charter
Class A common stock), as each term is defined in the Plans. Employees,
officers, consultants and directors of the Company and its subsidiaries and
affiliates are eligible to receive grants under the Plans. Options granted
generally vest over four to five years from the grant date, with 25% generally
vesting on the anniversary of the grant date and ratably thereafter. Generally,
options expire 10 years from the grant date. The Plans allow for the
issuance of up to a total of 90,000,000 shares of Charter Class A common
stock (or units convertible into Charter Class A common stock).

The
fair
value of each option granted is estimated on the date of grant using the
Black-Scholes option-pricing model. The following weighted average assumptions
were used for grants during the three months ended September 30, 2006 and 2005,
respectively: risk-free interest rates of 4.9% and 4.2%; expected volatility
of
72.9% and 68.5%; and expected lives of 6.25 years and 4.5 years, respectively.
The following weighted average assumptions were used for grants during the
nine
months ended September 30, 2006 and 2005, respectively: risk-free interest
rates
of 4.7% and 4.0%; expected volatility of 86.3% and 69.9%; and expected lives
of
6.25 years and 4.5 years, respectively. The valuations assume no dividends
are
paid. During the three and nine months ended September 30, 2006, the Company
granted 0.6 million and 5.5 million stock options, respectively, with a weighted
average exercise price of $1.18 and $1.08, respectively. As of September 30,
2006, the Company had 27.5 million and 11.6 million options outstanding and
exercisable, respectively, with weighted average exercise prices of $3.81 and
$6.44, respectively, and weighted average remaining contractual lives of 8
years
and 6 years, respectively.

On
January 1, 2006, the Company adopted revised SFAS No. 123, Share
- Based payment,
which
addresses the accounting for share-based payment transactions in which a company
receives employee services in exchange for (a) equity instruments of that
company or (b) liabilities that are based on the fair value of the company’s
equity instruments or that may be settled by the issuance of such equity
instruments. Because the Company adopted the fair value recognition provisions
of SFAS No. 123 on January 1, 2003, the revised standard did not have a material
impact on its financial statements. The Company recorded $3 million and $3
million of option compensation expense which is included in general and
administrative expense for the three months ended September 30, 2006 and 2005,
respectively, and $10 million and $11 million for the nine months ended
September 30, 2006 and 2005, respectively.

In
February 2006, the Compensation and Benefits Committee of Charter’s Board of
Directors approved a modification to the financial performance measures under
Charter's Long-Term Incentive Program ("LTIP") required to be met for the
performance shares to vest. After the modification, management believes that
approximately 2.5 million of the performance shares are likely to vest. As
such,
expense of approximately $3 million will be amortized over the remaining two
year service period. During the nine months ended September 30, 2006, Charter
granted an additional 8.7 million performance shares under the LTIP. The impact
of such grant and the modification of the 2005 awards was $3 million for the
nine months ended September 30, 2006.

20. Related
Party
Transactions

The
following sets forth certain transactions in which the Company and the
directors, executive officers and affiliates of the Company are involved. Unless
otherwise disclosed, management believes that each of the transactions

22

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

described below was on terms no less favorable to the Company
than could have been obtained from independent third parties.

CC
VIII, LLC

As
part
of the acquisition of the cable systems owned by Bresnan Communications Company
Limited Partnership in February 2000, CC VIII, Charter’s indirect limited
liability company subsidiary, issued, after adjustments, 24,273,943 Class A
preferred membership units (collectively, the "CC VIII interest") with an
initial value and an initial capital account of approximately $630 million
to
certain sellers affiliated with AT&T Broadband, subsequently owned by
Comcast Corporation (the "Comcast sellers"). Mr. Allen granted the
Comcast sellers the right to sell to him the CC VIII interest for
approximately $630 million plus 4.5% interest annually from February 2000
(the "Comcast put right"). In April 2002, the Comcast sellers exercised the
Comcast put right in full, and this transaction was consummated on June 6,
2003. Accordingly, Mr. Allen became the holder of the CC VIII
interest, indirectly through an affiliate. In
the
event of a liquidation of CC VIII, the owners of the CC VIII interest would
be
entitled to a priority distribution with respect to a 2% priority return (which
will continue to accrete). Any remaining distributions in liquidation would
be
distributed to CC V Holdings, LLC (“CC V”) and the owners of the CC VIII
interest in proportion to their capital accounts (which would have equaled
the
initial capital account of the Comcast sellers of approximately $630 million,
increased or decreased by Mr. Allen's pro rata share of CC VIII’s profits or
losses (as computed for capital account purposes) after June 6,
2003).

An
issue
arose as to whether the documentation for the Bresnan transaction was correct
and complete with regard to the ultimate ownership of the CC VIII interest
following consummation of the Comcast put right. Thereafter, the board of
directors of Charter formed a Special Committee of independent directors to
investigate the matter and take any other appropriate action on behalf of
Charter with respect to this matter. After conducting an investigation of the
relevant facts and circumstances, the Special Committee determined that a
"scrivener’s error" had occurred in February 2000 in connection with the
preparation of the last-minute revisions to the Bresnan transaction documents
and that, as a result, Charter should seek the reformation of the Charter Holdco
limited liability company agreement, or alternative relief, in order to restore
and ensure the obligation that the CC VIII interest be automatically exchanged
for Charter Holdco units.

As
of
October 31, 2005, Mr. Allen, the Special Committee, Charter, Charter Holdco
and
certain of their affiliates, agreed to settle the dispute, and execute certain
permanent and irrevocable releases pursuant to the Settlement Agreement and
Mutual Release agreement dated October 31, 2005 (the "Settlement"). Pursuant
to
the Settlement, CII has retained 30% of its CC VIII interest (the "Remaining
Interests"). The Remaining Interests are subject to certain transfer
restrictions, including requirements that the Remaining Interests participate
in
a sale with other holders or that allow other holders to participate in a sale
of the Remaining Interests, as detailed in the revised CC VIII Limited Liability
Company Agreement. CII transferred the other 70% of the CC VIII interest
directly and indirectly, through Charter Holdco, to a newly formed entity,
CCHC
(a direct subsidiary of Charter Holdco and the direct parent of Charter
Holdings). Of the 70% of the CC VIII interest, 7.4% has been transferred by
CII
to CCHC for a subordinated exchangeable note with an initial accreted value
of
$48 million, accreting at 14% per annum, compounded quarterly, with a 15-year
maturity (the "Note"). The remaining 62.6% has been transferred by CII to
Charter Holdco, in accordance with the terms of the settlement for no additional
monetary consideration. Charter Holdco contributed the 62.6% interest to CCHC.

As
part
of the Settlement, CC VIII issued approximately 49 million additional Class
B
units to CC V in consideration for prior capital contributions to CC VIII by
CC
V, with respect to transactions that were unrelated to the dispute in connection
with CII’s membership units in CC VIII. As a result, Mr. Allen’s pro rata share
of the profits and losses of CC VIII attributable to the Remaining Interests
is
approximately 5.6%.

The
Note
is exchangeable, at CII’s option, at any time, for Charter Holdco Class A Common
units at a rate equal to the then accreted value, divided by $2.00 (the
"Exchange Rate"). Customary anti-dilution protections have been provided that
could cause future changes to the Exchange Rate. Additionally, the Charter
Holdco Class A Common units received will be exchangeable by the holder into
Charter common stock in accordance with existing agreements

23

CHARTER
COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollars
in millions, except per share amounts and where
indicated)

between
CII, Charter and certain other parties signatory thereto. Beginning February
28,
2009, if the closing price of Charter common stock is at or above the Exchange
Rate for a certain period of time as specified in the Exchange Agreement,
Charter Holdco may require the exchange of the Note for Charter Holdco Class
A
Common units at the Exchange Rate.

CCHC
has
the right to redeem the Note under certain circumstances, for cash in an amount
equal to the then accreted value. Such amount, if redeemed prior to February
28,
2009, would also include a make whole provision up to the accreted value through
February 28, 2009. CCHC must redeem the Note at its maturity for cash in an
amount equal to the initial stated value plus the accreted return through
maturity.

As
part
of the debt exchange in September 2006 described in Note 6, CCHC contributed
the
CC VIII interest in the Class A preferred equity interests of CC VIII to CCH
I.
The CC VIII interest was pledged as security for all CCH I notes. The CC VIII
preferred interests are entitled to a 2% accreting priority return on the
priority capital.

Charter
Communications, Inc. ("Charter")
is a
holding company whose principal assets as of September
30, 2006
are a
52% controlling common equity interest in Charter Communications Holding
Company, LLC ("Charter
Holdco")
and
"mirror" notes that are payable by Charter
Holdco to
Charter
and
have
the same principal amount and terms as Charter’s
convertible senior notes.
"We,""us"
and
"our"
refer to
Charter and its subsidiaries.

We
are a
broadband communications company operating in the United States. We offer our
customers traditional cable video programming (analog and digital video) as
well
as high-speed Internet services and, in some areas, advanced broadband services
such as high definition television, video on demand, telephone and interactive
television. We sell our cable video programming, high-speed Internet, telephone
and advanced broadband services on a subscription basis.

The
following table summarizes our customer statistics for analog and digital video,
residential high-speed Internet and residential telephone as of September
30, 2006
and
2005:

Approximate
as of

September
30,

September
30,

2006
(a)

2005
(a)

Video
Cable Services:

Analog
Video:

Residential
(non-bulk) analog video customers (b)

5,216,900

5,636,100

Multi-dwelling
(bulk) and commercial unit customers (c)

259,700

270,200

Total
analog video customers (b)(c)

5,476,600

5,906,300

Digital
Video:

Digital
video customers (d)

2,767,900

2,749,400

Non-Video
Cable Services:

Residential
high-speed Internet customers (e)

2,343,200

2,120,000

Residential
telephone customers (f)

339,600

89,900

After
giving effect to the acquisition of cable systems in January 2006 and the sales
of certain non-strategic cable systems in the third quarter of 2006, September
30, 2005 analog video customers, digital video customers, high-speed Internet
customers and telephone customers would have been 5,523,500, 2,588,700,
2,023,900 and 104,700, respectively.

(a)

"Customers"
include all persons our corporate billing records show as receiving
service (regardless of their payment status), except for complimentary
accounts (such as our employees). At September 30, 2006 and 2005,
"customers" include approximately 51,200 and 49,300 persons whose
accounts
were over 60 days past due in payment, approximately 11,300 and 9,900
persons whose accounts were over 90 days past due in payment, and
approximately 6,200 and 6,000 of which were over 120 days past due
in
payment, respectively.

(b)

"Analog
video customers" include all customers who receive video services
(including those who also purchase high-speed Internet and telephone
services) but excludes approximately 289,700 and 261,800 customers
at
September 30, 2006 and 2005, respectively, who receive high-speed
Internet
service only or telephone service only and who are only counted as
high-speed Internet customers or telephone
customers.

(c)

Included
within "analog video customers" are those in commercial and multi-dwelling
structures, which are calculated on an equivalent bulk unit ("EBU")
basis.
EBU is calculated for a system by dividing the bulk price charged
to
accounts in an area by the most prevalent price charged to non-bulk
residential customers in that market for the comparable tier of service.
The EBU method of estimating analog video customers is consistent
with the
methodology used in determining costs paid to programmers and has
been
consistently applied year over year. As we increase our effective
analog
prices to residential customers without a

25

corresponding increase in the prices charged to
commercial service or multi-dwelling customers, our EBU count will
decline
even if there is no real loss in commercial service or multi-dwelling
customers.

(d)

"Digital
video customers" include all households that have one or more digital
set-top terminals. Included in "digital video customers" on September
30,
2006 and 2005 are approximately 6,700 and 8,900 customers, respectively,
that receive digital video service directly through satellite
transmission.

We
have a
history of net losses. Our net losses are principally attributable to
insufficient revenue to cover the combination
of operating costs and interest
costs we incur because of our high level of debt and depreciation expenses
that
we incur resulting from the capital investments we have made and continue to
make in our cable properties. We expect that these expenses will remain
significant, and we therefore expect to continue to report net losses for the
foreseeable future. We had net losses of $974 million and $634 million for
the
nine months ended September 30, 2006 and 2005, respectively.

For
the
three months ended September 30, 2006 and 2005, our operating income from
continuing operations was $66 million and $54 million, respectively, and for
the
nine months ended September 30, 2006 and 2005, our operating income from
continuing operations was $204 million and $196 million, respectively. Operating
income from continuing operations includes depreciation and amortization expense
and asset impairment charges but excludes interest expense. We had operating
margins of 5% and 4% for the three months ended September 30, 2006 and 2005,
respectively, and 5% for each of the nine months ended September 30, 2006 and
2005. The increase in operating income from continuing operations and operating
margins for the three months ended September 30, 2006 compared to 2005 was
principally due to an increase in revenue over expenses as a result of increased
customers for digital and advanced services as well as overall rate
increases.

Historically,
our ability to fund operations and investing activities has depended on our
continued access to credit under our credit facilities. We expect we will
continue to borrow under our credit facilities from time to time to fund cash
needs. The occurrence of an event of default under our credit facilities could
result in borrowings from these credit facilities being unavailable to us and
could, in the event of a payment default or acceleration, also trigger events
of
default under the indentures governing our outstanding notes and would have
a
material adverse effect on us. See "— Liquidity and Capital
Resources."

Sale
of Assets

In
2006,
we sold certain cable television systems serving a total of approximately
356,000 analog video customers in 1) West Virginia and Virginia
to
Cebridge Connections, Inc. (the “Cebridge Transaction”); 2) Illinois and
Kentucky to Telecommunications Management, LLC, doing business as New Wave
Communications (the “New Wave Transaction”) and 3) Nevada, Colorado, New Mexico
and Utah to Orange Broadband Holding Company, LLC
(the
“Orange Transaction”) for a total sales price of approximately $971 million.
These cable systems met the criteria for assets held for sale. As such, the
assets were written down to fair value less estimated costs to sell resulting
in
asset impairment charges during the nine months ended September 30, 2006 of
approximately $99 million related to the New Wave Transaction and the Orange
Transaction. Also, in the third quarter of 2006, we recorded asset impairment
charges of $60 million related to other cable systems meeting the criteria
of
assets held for sale. In the third quarter of 2006 we have also determined
that
the West Virginia and Virginia cable systems comprise operations and cash flows
that for financial reporting purposes meet the criteria for discontinued
operations. Accordingly, the results of operations for the West Virginia and
Virginia cable systems, including a gain of approximately $200 million on the
transaction, have been presented as discontinued operations, net of tax for
the
three and nine months ended September 30, 2006 and all prior periods presented
herein have been reclassified to conform to the current
presentation.

26

Critical
Accounting Policies and Estimates

For
a
discussion of our critical accounting policies and the means by which we develop
estimates therefore, see "Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations" in our 2005 Annual Report on
Form
10-K.

RESULTS
OF OPERATIONS

Three
Months Ended September
30, 2006
Compared to Three Months Ended September
30, 2005

The
following table sets forth the percentages of revenues that items in the
accompanying condensed consolidated statements of operations constituted for
the
periods presented (dollars in millions, except per share data):

Three
Months Ended September 30,

2006

2005

Revenues

$

1,388

100

%

$

1,265

100

%

Costs
and expenses:

Operating
(excluding depreciation and amortization)

615

44

%

564

45

%

Selling,
general and administrative

309

22

%

263

21

%

Depreciation
and amortization

334

24

%

362

29

%

Asset
impairment charges

60

5

%

--

--

Other
operating expenses, net

4

--

22

2

%

1,322

95

%

1,211

96

%

Operating
income from continuing operations

66

5

%

54

4

%

Interest
expense, net

(466

)

(462

)

Other
income, net

131

504

(335

)

42

Income
(loss) from continuing operations before income taxes

(269

)

96

Income
tax expense

(64

)

(24

)

Income
(loss) from continuing operations

(333

)

72

Income
from discontinued operations, net of tax

200

4

Net
income (loss)

(133

)

76

Dividends
on preferred stock - redeemable

--

(1

)

Net
income (loss) applicable to common stock

$

(133

)

$

75

Earnings
(loss) per common share:

Income
(loss) from continuing operations, basic

$

(1.02

)

$

0.23

Income
(loss) from continuing operations, diluted

$

(1.02

)

$

0.08

Net
income (loss), basic

$

(0.41

)

$

0.24

Net
income (loss), diluted

$

(0.41

)

$

0.09

Weighted
average common shares outstanding, basic

326,910,632

316,214,740

Weighted
average common shares outstanding, diluted

326,910,632

1,012,591,842

Revenues.
The
overall increase in revenues from continuing operations in 2006 compared to
2005
is principally the result of an increase from September 30, 2005 of 299,100
high-speed Internet customers, 133,200 digital video

27

customers
and 234,900 telephone customers, as well as price increases for video and
high-speed Internet services, and is offset partially by a decrease of 189,700
analog video customers. Our
goal
is to increase revenues by improving customer service, which we believe will
stabilize our analog video customer base, implementing price increases on
certain services and packages, and increasing the number of customers who
purchase high-speed Internet services, digital video and advanced products
and
services such as telephone, video on demand ("VOD"), high definition television
and digital video recorder service.

Average
monthly revenue per analog video customer increased to $83.27 for the three
months ended September
30, 2006
from
$74.34 for the three months ended September
30, 2005
primarily as a result of incremental revenues from advanced services and price
increases. Average monthly revenue per analog video customer represents total
quarterly revenue, divided by three, divided by the average number of analog
video customers during the respective period.

Revenues
by service offering were as follows (dollars in millions):

Three
Months Ended September 30,

2006

2005

2006
over 2005

Revenues

%
of

Revenues

Revenues

%
of

Revenues

Change

%
Change

Video

$

836

60

%

$

811

64

%

$

25

3

%

High-speed
Internet

267

19

%

222

18

%

45

20

%

Telephone

37

3

%

9

1

%

28

311

%

Advertising
sales

81

6

%

72

6

%

9

13

%

Commercial

78

6

%

68

5

%

10

15

%

Other

89

6

%

83

6

%

6

7

%

$

1,388

100

%

$

1,265

100

%

$

123

10

%

Video
revenues consist primarily of revenues from analog and digital video services
provided to our non-commercial customers. Approximately
$28 million of the increase was the result of price increases and incremental
video revenues on advanced services from existing customers and approximately
$15 million was the result of an increase in digital video customers. The
increases were offset by decreases of approximately $6 million related to a
decrease in analog video customers and approximately $12 million related to
the
cable asset sales described above in “Sale of Assets” (the “System
Sales”).

Approximately
$37 million of the increase in revenues from high-speed Internet services
provided to our non-commercial customers related to the increase in the average
number of customers receiving high-speed Internet services, whereas
approximately $10 million related to the
increase in average price of the service.
The
increases were offset by approximately $2 million related to the System
Sales.

Revenues
from telephone services increased primarily as a result of an increase of
234,900 telephone customers in 2006.

Advertising
sales revenues consist primarily of revenues from commercial advertising
customers, programmers and other vendors. Advertising sales revenues increased
primarily as a result of an increase in local and national advertising sales.
For the three months ended September 30, 2006 and 2005, we received $3 million
and $5 million, respectively, in advertising sales revenues from
programmers.

Commercial
revenues consist primarily of revenues from video and high-speed Internet
services provided to our commercial customers. Commercial revenues increased
primarily as a result of an increase in commercial high-speed Internet revenues.

Other
revenues consist of revenues from franchise fees, equipment rental, customer
installations, home shopping, dial-up Internet service, late payment fees,
wire
maintenance fees and other miscellaneous revenues. For the three months ended
September 30, 2006 and 2005, franchise fees represented approximately 51% and
53%, respectively, of total other revenues. The increase in other revenues
was
primarily the result of an increase in installation revenue of $3 million and
wire maintenance fees of $3 million.

28

Operating
Expenses.
Programming costs represented 61% of operating expenses for each of the three
months ended September 30, 2006 and 2005, respectively. Key expense components
as a percentage of revenues were as follows (dollars in millions):